Money still flowed out of cigarette firm's bank account

HAMPTON — Thousands of dollars have slowly bled out of a checking account created for an undercover cigarette operation that was shut down by the Hampton Police more than nine months ago.

Blue Water Tobacco, a sting company designed to go after cigarette bootleggers, was shut down on Jan. 27 following a misconduct complaint pertaining to officer spending, with the city manager having said the account was frozen at that time.

But since Feb. 1, city records show, at least $14,689 in payments and debits have been made from the firm's checking account.

Bank statements from Langley Federal Credit Union show payments of $2,454 in February; $6,079 in March; and an average of $1,025 per month between April and September. Many of the payments appear to have covered bills for utilities that were never turned off.

The $6,079 paid out in March includes $874 paid to SiriusXM, a subscription satellite radio services provider. The city has not provided any information to the Daily Press as to why the undercover officers needed satellite radio services.

There have also been a handful of deposits into the account since the operation ended — including a $223,000 deposit from an undisclosed source on March 2. As of Sept. 30, city records show, the checking account had a balance of $717,504.

The Blue Water Tobacco company — an undercover business designed to crack down on cigarette tax evasion and other crimes — saw more than $3 million flow through its checking account over the 19-month operation.

Money generated by the business was used not only to buy more cigarettes for the investigation, but also to purchase nine cars and SUVs, to fund out-of-town training trips for officers, and to buy electronics, among other expenses.

The operation, which led to no arrests, was shut down by Police Chief Charles R. Jordan Jr. in January after an officer came to him with a misconduct allegation pertaining to officer spending. The case is now the subject of an internal investigation.

In a September email to the Daily Press, City Manager Mary Bunting said all money, vehicles and other assets associated with Blue Water Tobacco had been "frozen" immediately after Jordan shut the operation down in January.

"The use of such property was frozen immediately upon the Chief's decision to cease the operation and call in the State Police," she wrote in an email on Sept. 27.

Because she had been told the account's activity had ceased, Bunting said she was surprised two weeks ago when the City Attorney's Office informed her that money was still coming out of the checking account to pay automated utility bills.

"When I was advised of it, I said, 'Let's get them all turned off,'" Bunting said, adding that the city is the "safekeeper" of the money.

As for why utilities weren't turned off months ago, Bunting said it's premature to speculate, but that she's expecting to get an answer to the question as part of various ongoing investigations into the cigarette operation.

"We're trying to get to the bottom of it," she said. "I am as anxious as anyone to get the answers to these and other questions that people are asking."

Bunting said the City Attorney's Office and City Finance Office have been turning off the utilities. She added that the city is "in the process of converting the bank account to an escrow account with an escrow agent. That should be completed shortly."

Many of the ongoing payments appear to be utility bills for the firm's warehouse operation on Mingee Drive. The building, which once housed Blue Water Tobacco, has been vacated for at least seven months.

The payments amounted to $1,048 in April; $1,016 in May; $877 in June; $1,174 in July; $1,048 in August; and $991 in September.

The September payments, for example, include $439 to Verizon Wireless; $249 to Cox Communications; $106 to Dominion Virginia Power; $59 to ADT Security Services; $52 to Newport News Waterworks; $70 to AT&T Data; and $15 to the Hampton Roads Sanitation District

"It's the responsibility of the tenant to get their names out of the utilities," said Travis Waltz, the Realtor from Campana Waltz who is working with the building's owners to find a new tenant.

Aside from the satellite services, the March payments from the account also include "share drafts" of $1,075 on March 7 and $1,925 on March 16 — where it's impossible for the Daily Press to determine who got paid.

Reached by the Daily Press two weeks ago, one Hampton councilman, W.H. "Billy" Hobbs Jr., said he was concerned money was still coming out of Blue Water Tobacco's checking account.

"I'm concerned enough that I'm going to find out about it, absolutely," Hobbs said. "That's another question I need to get the answer to. I thought it was a locked account, and that when you lock the account, nothing goes in and nothing goes out."

Councilman Chris Stuart said he wasn't "privy to the ebb and flow" of Blue Water Tobacco account, saying he didn't know money was still coming out.

"I don't now what the contractual obligations are, but there's an expectation that we reduce or eliminate any unnecessary expenses as soon as possible," Stuart said. "Whether that money eventually goes to the State Literary Fund or some pool for investigations, it's better that it go for good causes rather than go to utility expenses" for a concluded operation.

Warehouse rental payments are not among the monthly charges.

That's because Blue Water Tobacco made an up-front annual payment in September 2011 to lease the 6,000 square foot building on Mingee Drive, Waltz said. The lease, he said, ran from Sept. 1, 2011, to Aug. 31, 2012.

One Blue Water Tobacco checking account statement shows a $35,000 check on Sept. 22, 2011, though Waltz declined to confirm that that was the annual lease payment.

Waltz said the city didn't get any reimbursement for vacating the building several months early. "Just because they left and were done didn't give them the opportunity to get credit back," he said.

The owners of the Mingee Drive building, Calvin B. Todd and Elaine Todd of Newport News, did not return phone calls last week.

The city has not yet provided Blue Water Tobacco's checking account statement for October, nor provided detailed supporting receipts for many of the transactions from the account. (The Daily Press has pending requests for all financial records associated with the checking account).

The city has not said where the cash in the account will ultimately go.